If you’ve been paying attention, you probably would’ve noticed that inflation is at an all-time high. Living is now more expensive than ever before. Everything costs more, from your movie tickets to your groceries to even fuelling your car. And after you’ve sorted out your bills you might have very little left to save, not to talk of invest.

If you are reading this piece, it is because you want your money to work for you. And why not? You work hard for it. But, with inflation rising, your purchasing power is dropping, especially if you are leaving your money sitting around, not earning interest.

A savings account just isn’t enough interest. Let’s say you have ₦100,000 in a savings account that pays a 1% interest rate p.a. After a year, you will have ₦101,000 in your account. But if the rate of inflation is running at 2%, you’d need ₦102,000 to have the same buying power that you started with. You’ve gained a thousand naira but lost buying power. Any time your savings don’t grow at the same rate as inflation, you will effectively lose money.

What can you do instead? You can invest your savings for a better return.

Starting out with Investing

Before you begin investing, consider the risks and ensure that you won’t need the money you’re investing for a long time – preferably five years or more. Experts advise that you pay off high-interest debt— because the interest you’ll pay will negate any gains you make on your investments; and build an emergency fund — because you will need three months or more of living expenses in a savings account to ensure that you are able to survive financially in the event of an unexpected issue e.g., job loss.

You can begin investing when you’ve made progress on your debts and your emergency fund.

Budgeting for Investing

Most of us shy away from saving and investing because we think we don’t have enough money to begin. For most of us also, budgeting for investing may seem like a daunting task, especially if you’ve never invested before. But here’s how you can get started with your budgeting for your investments.

1. Identify your net monthly income: Consider all your sources of monthly income after removing taxes, pension, insurance, etc.
2. Identify your monthly spend: Consider all your monthly expenses including power, and other utilities, as well as those that occur periodically like rent, children’s fees, and medical expenses.
3. Subtract your monthly spend from your income: This difference will let you know whether you have any money to spare or not.
4. Assess your budget: As a monthly exercise, look at your expenditure viz a viz your income to see if you are on track with your budget. If not, you may need to rework your budget. Leave room for spending “leakages” – little expenses that are not accounted for but add up.

Investing with Little Money

Saving money and investing it are closely related. You have to first save some money up before you invest it. Here are different shoestring approaches you can use to start your investment journey, with the little savings you have.

1. The ‘Kolo’ Approach: Start by putting away as little as ₦1000 per week. It may seem very little, but over the course of a year, it comes to over ₦52,000. You can put this ₦1000 into your ‘kolo’ – an envelope, shoebox, a small safe or even a high yield savings account. When the stash is large enough, you can take it out and move it into actual investment vehicles.
2. An Employer- Sponsored Retirement Plan: If you’re on a tight budget, you can begin investing in your employer’s retirement plan with little amounts that you won’t notice. E.g., if you invest 1% of your salary into the employer plan, you won’t even miss a contribution that small. You can choose to increase your contribution yearly or as your annual pay increases.
3. Mutual funds: These are groups of stocks you can buy into that follow a set of objectives set by the company. For example, the fund may only invest in growth companies or in dividends. You can start investing with as little as ₦1000. You can diversify your investment portfolio with fractional shares. Instead of investing in a full share, you can buy a fraction of a share.
4. Real Estate: You don’t need a lot of money to invest in real estate. With real estate crowdfunding you can own fractional shares of large commercial properties without the headache of being a landlord. You can also earn monthly investment returns with real estate. You can learn about commercial real estate investing and how to diversify your assets here.

Different approaches work for different investors. Know your personal risk tolerance and be comfortable with the risk of your potential investments – historically, the lower the risk, the lower the returns and vice versa. You do not need huge amounts of money to start up with investing. Choose an approach and start with what you have. Feel free to write us, to share your investment journey with us at [email protected]. We will be happy to hear from you.

Disclaimer: note that this article does not constitute as investment advice. This article is for general purposes of information only.